No. 150 BETHLEHEM- CENTER SCHOOL DISTRICT SECTION: TITLE: ADOPTED: REVISED: PROGRAMS FEDERAL PROGRAMS ALLOWABILITY OF COSTS 150. FEDERAL PROGRAMS ALLOWABILITY OF COSTS Expenditures must be aligned with approved budgeted items. Any changes or variations from the state approved budget and grant application need prior approval from the state. When determining how the District will spend its grant funds, Business office will review the proposed cost to determine whether it is an allowable use of federal grant funds before obligating and spending those funds on the proposed good or service. All costs supported by federal education funds must meet the standards outlined in EDGAR, 2 C.F.R. Part 3474 and 2 C.F.R. Part 200, Subpart E, which are provided in the bulleted list below, to the Business Office and must consider these factors when making an allowability determination. 2 C.F.R. 200.404 Be Necessary and Reasonable for the performance of the federal award. District staff must consider these elements when determining the reasonableness of a cost. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision to incur the cost was made. For example, reasonable means that sound business practices were followed, and purchases were comparable to market prices. When determining reasonableness of a cost, consideration must be given to: Whether the cost is a type generally recognized as ordinary and necessary for the operation of the District or the proper and efficient performance of the federal award. The restrains or requirements imposed by factors, such as: sound business practices; arm s-length bargaining; federal, state and other laws and regulations; and terms and conditions of the federal award. Market prices for comparable goods or services for the geographic area. Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the District, its employees, its students, the public at large, and the federal Page 1 of 6
- Pg. 2 2 C.F.R. 200.405 government. Whether the district significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the federal award s cost. While 2 C.F.R. 200.404 does not provide specific descriptions of what satisfies the necessary element beyond its inclusion in the reasonableness analysis above, necessary is determined based on the needs of the program. Specifically, the expenditure must be necessary to achieve an important program objective. A key aspect in determining whether a cost is necessary is whether the district can demonstrate that the cost addresses an existing need, and can prove it. For example, the district may deem a language skills software program necessary for a limited English proficiency program. When determining whether a cost is necessary, consideration may be given to: Whether the cost is needed for the proper and efficient performance of the grant program. Whether the cost is identified in the approved budget or application. Whether there is an educational benefit associated with the cost. Whether the cost aligns with identified needs based on results and findings from a needs assessment. Whether the cost addresses program goals and objectives and is based on program data. Allocable to the federal award. A cost is allocable to the federal award if the goods or services involved are chargeable or assignable to the federal award in accordance with the relative benefit received. This means that the federal grant program derived a benefit in proportion to the funds charged to the program. For example, if 50% of a teacher s salary is paid with grant funds, then that teacher must spend at least 50% of his or her time on the grant program. Consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the District. Conform to any limitations or exclusions set forth as cost principles in Part 200 or in the terms and conditions of the federal award. Page 2 of 6
- Pg. 3 Consistent treatment. A cost cannot be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been assigned as an indirect cost under another award. Adequately documented. All expenditures must be properly documented. Be determined in accordance with general accepted accounting principles (GAAP), unless provided otherwise in Part 200. Not included as a match or cost-share, unless the specific federal program authorizes federal costs to be treated as such. Some federal program statutes require the non-federal entity to contribute a certain amount of non-federal resources to be eligible for the federal program. 2 C.F.R. 200.406 Be the net of all applicable credits. The term applicable credits refers to those receipts or reduction of expenditures that operate to offset or reduce expense items allocable to the federal award. Typical examples of such transactions are: purchase discounts; rebates or allowances; recoveries or indemnities on losses; and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the state relate to the federal award, they shall be credited to the federal award, either as a cost reduction or a cash refund, as appropriate. The district defers to State and local rules in district policy #430. Part 200 s cost guidelines must be considered when federal grant funds are expended. As provided above, federal rules require state- and District-level requirements and policies regarding expenditures to be followed as well. For example, state and/or District policies relating to travel or equipment may be narrower than the federal rules, and the stricter State and/or District policies must be followed. Further, certain types of incentives are allowable under federal law, but are not allowable under State law. 2 C.F.R. 200.420-200.475 Selected Items of Cost Part 200 examines the allowability of 55 specific cost items (commonly referred to as Selected Items of Cost). These cost items are listed in the chart below along with the citation where it is discussed whether the item is allowable. Please do not assume that an item is allowable because it is specifically listed in the regulation as it may be unallowable despite its inclusion in the selected items of cost section. The expenditure may be unallowable for a number of reasons, including: the express language of the regulation states the item is unallowable; the terms and conditions of the grant deem the item unallowable; or State/local restrictions dictate that the item Page 3 of 6
- Pg. 4 is unallowable. The item may also be unallowable because it does not meet one of the cost principles, such as being reasonable because it is considered too expensive. If an item is unallowable for any of these reasons, federal funds cannot be used to purchase it. District personnel responsible for spending federal grant funds and for determining allowability must be familiar with the Part 200 selected items of cost section. The District must follow these rules when charging these specific expenditures to a federal grant. When applicable, District staff must check costs against the selected items of cost requirements to ensure the cost is allowable. In addition, State, District and program-specific rules may deem a cost as unallowable and District personnel must follow those non-federal rules as well. The selected item of cost addressed in Part 200 includes the following (in alphabetical order): Item of Cost Citation of Allowability Rule Advertising and public relations costs 2 CFR 200.421 Advisory councils 2 CFR 200.422 Alcoholic beverages 2 CFR 200.423 Alumni/ae activities 2 CFR 200.424 Audit services 2 CFR 200.425 Bad debts 2 CFR 200.426 Bonding costs 2 CFR 200.427 Collection of improper payments 2 CFR 200.428 Commencement and convocation costs 2 CFR 200.429 Compensation personal services 2 CFR 200.430 Compensation fringe benefits 2 CFR 200.431 Conferences 2 CFR 200.432 Contingency provisions 2 CFR 200.433 Contributions and donations 2 CFR 200.434 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent 2 CFR 200.435 infringements Depreciation 2 CFR 200.436 Employee health and welfare costs 2 CFR 200.437 Entertainment costs 2 CFR 200.438 Equipment and other capital expenditures 2 CFR 200.439 Exchange rates 2 CFR 200.440 Fines, penalties, damages and other settlements 2 CFR 200.441 Fund raising and investment management costs 2 CFR 200.442 Gains and losses on disposition of depreciable 2 CFR 200.443 assets General costs of government 2 CFR 200.444 Page 4 of 6
- Pg. 5 Goods and services for personal use 2 CFR 200.445 Idle facilities and idle capacity 2 CFR 200.446 Insurance and indemnification 2 CFR 200.447 Intellectual property 2 CFR 200.448 Interest 2 CFR 200.449 Lobbying 2 CFR 200.450 Losses on other awards or contracts 2 CFR 200.451 Maintenance and repair costs 2 CFR 200.452 Materials and supplies costs, including costs of 2 CFR 200.453 computing devices Memberships, subscriptions, and professional 2 CFR 200.454 activity costs Organization costs 2 CFR 200.455 Participant support costs 2 CFR 200.456 Plant and security costs 2 CFR 200.457 Pre-award costs 2 CFR 200.458 Professional services costs 2 CFR 200.459 Proposal costs 2 CFR 200.460 Publication and printing costs 2 CFR 200.461 Rearrangement and reconversion costs 2 CFR 200.462 Recruiting costs 2 CFR 200.463 Relocation costs of employees 2 CFR 200.464 Rental costs of real property and equipment 2 CFR 200.465 Scholarships and student aid costs 2 CFR 200.466 Selling and marketing costs 2 CFR 200.467 Specialized service facilities 2 CFR 200.468 Student activity costs 2 CFR 200.469 Taxes (including Value Added Tax) 2 CFR 200.470 Termination costs 2 CFR 200.471 Training and education costs 2 CFR 200.472 Transportation costs 2 CFR 200.473 Travel costs 2 CFR 200.474 Trustees 2 CFR 200.475 Likewise, it is possible for the State and/or District to put additional requirements on a specific item of cost. Under such circumstances, the stricter requirements must be met for a cost to be allowable. Accordingly, employees must consult federal, State and District requirements when spending federal funds. For example, often the State s travel rules are more restrictive than federal rules, which means the State s policies must be followed. In order for a cost to be allowable, the expenditure must also be allowable under the applicable program statute (e.g., Title I of the Elementary and Secondary Education Act (ESEA), or the Carl D. Perkins Career and Technical Education Act (Perkins)), Page 5 of 6
- Pg. 6 along with accompanying program regulations, non-regulatory guidance and grant award notifications. The state and/or District rules related to some specific cost items are discussed below. District employees must be aware of these State and District rules and ensure they are complying with these requirements. Helpful Questions for Determining Whether a Cost is Allowable In addition to the cost principles and standards described above, Business offices can refer to this section for a useful framework when performing an allowability analysis. In order to determine whether federal funds may be used to purchase a specific cost, it is helpful to ask the following questions: Is the proposed cost allowable under the relevant program? Is the proposed cost consistent with an approved program plan and budget? Is the proposed cost consistent with program specific fiscal rules? o For example, the District may be required to use federal funds only to supplement the amount of funds available from nonfederal (and possibly other federal) sources. Is the proposed cost consistent with EDGAR? Is the proposed cost consistent with specific conditions imposed on the grant (if applicable)? As a practical matter, Business office should also consider whether the proposed cost is consistent with the underlying needs of the program. For example, program funds must benefit the appropriate population of students for which they are allocated. This means that, for instance, funds allocated under Title III of the Elementary and Secondary Education Act (ESEA) governing language instruction programs for limited English proficient (LEP) students must only be spent on LEP students and cannot be used to benefit non-lep students. Further, under most major elementary and secondary education programs, recipients Also, funds should be targeted to address areas of weakness, as necessary. To make this determination, Business office should review data when making purchases to ensure that federal funds to meet these areas of concern. Page 6 of 6